Contractual penalties in estate agency agreements: where protection of commission ends and an unfair term begins

An estate agency invests time and money in a transaction long before any entitlement to commission arises: photographs, advertising, viewings, negotiations. It is understandable that it wants to protect exclusivity and reservations, and the most common instrument is a contractual penalty. Where the client is a consumer, however, the penalty must survive the test of unfair terms. A term in a standard form that fails that test can be challenged in every agreement in which the agency has used it.

When a penalty is unfair

Both an estate agency agreement and a reservation agreement concluded by an agency with a natural person not acting in the course of their business are consumer contracts. The Civil Code lays down the basic rule for them:

Consumer contracts must not contain provisions causing a significant imbalance in the rights and obligations of the parties to the detriment of the consumer […]

— Section 53(1) of Act No. 40/1964 Coll. (unofficial English translation)

Unfair terms are invalid (Section 53(5)). Of the statutory list of examples, two in particular bear on estate agency standard forms: a provision allowing the trader not to release the consumer’s performance to them even where the consumer does not conclude the contract or withdraws from it (Section 53(4)(e)), and a requirement that a consumer who has failed to perform an obligation pay a disproportionately high sum as a sanction (Section 53(4)(k)). The fact that the client signed the whole text is beside the point: terms in a standard form agreement are not regarded as individually negotiated unless the agency proves otherwise (Section 53(2) and (3)).

What did not survive before the Supreme Administrative Court

In the course of an inspection of an estate agency, the Slovak Trade Inspection ordered it by a measure to amend its standard forms. The agency defended itself by objections, an administrative action and a cassation complaint, and failed; the Supreme Administrative Court dismissed the cassation complaint (judgment of the Supreme Administrative Court of the Slovak Republic, file no. 3Stk/8/2023 of 25 September 2024). Two provisions were assessed:

• in the estate agency agreement, a penalty of 10 % of the asking price, capped at the amount of the commission, for breach of even one of several of the client’s duties, among them contact with a third party without the agency’s written consent, while the agency itself was bound by no penalty at all,
• in the reservation agreement, a penalty of 3 % of the purchase price if the interested party failed to pay the reservation fee on time or failed to conclude the agreement by the deadline; the penalty exceeded the fee itself, whereas on a breach of its own duty the agency merely returned the fee.

Both the Regional Court and the Supreme Administrative Court stressed that a contractual penalty is not as such unfair. What was decisive was its content, the breadth of the cases in which it had to be paid, and the fact that it bound the client alone. In the estate agency agreement the Supreme Administrative Court also saw features of circumventing the purpose of commission: if the brokered agreement is not concluded, no commission arises, and the agency cannot secure it by a penalty in the amount of the commission. Nor did the court accept the argument that the loss of commission or the return of the fee is already a sanction for the agency, because a breach of the agency’s duties may cause the client loss which that does not make good. The inspection was still conducted under the earlier consumer protection act; the rules in Section 53 of the Civil Code, on which the courts built, continue to apply. Here the court was reviewing a decision of the inspection; in a dispute about payment of a penalty, a civil court assesses the unfairness of the term independently under the same Section 53.

How to protect commission differently

What helps commission most is evidence that the agency brought the transaction about. Where the client is a consumer, remuneration is payable if the result was achieved through the broker’s efforts (Section 774), and in certain circumstances also where the transaction is concluded only after the agreement has ended, as we explain in estate agency commission after the agreement ends. A signed viewing protocol and a record of introducing the interested party will therefore serve the agency better than a sanction a court may declare invalid. When the entitlement arises is discussed in when does an estate agency become entitled to commission?.

If the agency nonetheless wants a penalty, the following principles have proved themselves:

• a narrowly defined duty whose breach genuinely harms the agency, rather than an entire catalogue of duties with a single penalty for any lapse,
• a proportionate amount that does not substitute for commission on a transaction that never took place,
• symmetry, meaning a sanction for the agency as well if it is the one that breaches its duty,
• written form and a stated amount, or the method of determining it, failing which no penalty arises at all (Section 544(2)),
• fault: unless the agreement provides otherwise, the debtor does not pay the penalty if they did not cause the breach (Section 545(3)); with a reservation this may be the case where the bank does not approve the loan although the interested party applied for it properly.

The same applies to the reservation fee: the agreement must say clearly when it is set off, when it is returned and when it is forfeited, and must not turn it into a hidden commission for a transaction that was never concluded. The basics are explained in reservation agreements and reservation fees, and the difference between a reservation and a commitment to buy is discussed in the article a reservation agreement, or an agreement to conclude a future agreement.

One term, every agreement

The consequences of an unfair term reach beyond a single transaction. If a court declares a term used in several agreements invalid for unfairness, the trader must refrain from it, and from every term of the same meaning, in agreements with all consumers (Section 53a(1)). The inspection, in turn, as the case described shows, may order by a measure during an inspection that the shortcomings identified be removed, including amendment of the standard forms the agency uses (Section 6(1)(a) of Act No. 128/2002 Coll.).

We set contractual penalties in estate agency and reservation agreements so that they protect the agency and at the same time hold up against a consumer, as part of the estate agency documentation package. We will separately prepare or revise a reservation agreement, and if you also want a lawyer on your individual transactions, see legal services for estate agencies.

How this will work under the new Civil Code

On 1 October 2026, the National Council of the Slovak Republic approved the new Slovak Civil Code, which will take effect on 1 July 2027. The test for unfair terms will remain the same, including the prohibition of a disproportionately high sanction and of retaining the performance of a consumer who does not conclude the contract or withdraws from it. For estate agency agreements, however, the following will change:

• Absence of fault would not be enough. In our interpretation, the penalty would be tied to non-performance that is not excused. The client would not escape it on the ground that the breach was not their fault, but only through an impediment beyond their control which they could neither foresee nor overcome. An impediment arising from their economic circumstances, or one that arose only during their default, does not count. Whether a court will accept the rejection of a loan as such an impediment is an open question. If the penalty is to apply only to a culpable breach, the agreement must say so.
• Exclusivity will be governed by statute. If, during exclusive brokerage, the client concludes the contract without the agency, the client will pay the agency commission as if it had brokered the deal. If the deal is not concluded, commission will not, as a rule, arise, and on a purchase conditional, for example, on a loan, it will arise only once the condition is fulfilled. It would arise earlier only if the agreement specifies that the agency is merely to procure an opportunity to conclude the contract.
• A different consequence of unfairness. An unfair term will be disregarded, but the consumer will be able to propose that the court apply it. If the term survives this review, the court may reduce a disproportionately harsh sanction on the debtor’s application; the explanatory memorandum also places the forfeiture of a reservation fee here.
• Narrower blanket effect. The obligation to stop using a term in all consumer contracts will arise only from a decision in abstract review proceedings, not from an individual dispute.

Agreements concluded by 30 June 2027 will be assessed under the existing law, including fault and the invalidity of an unfair term. Rework your templates for agreements from 1 July 2027, particularly their provisions on exclusivity, fault and the scope of penalties. How contractual sanctions will be unified is discussed in our article the consequences of breach of contract under the new rules.

Status as of 22 October 2026: the act has been approved and was signed by the President on 20 October 2026, but has not yet been promulgated in the Collection of Laws. Until 30 June 2027, the rules described above in this article apply.